Delek Investments to Buy Into Menorah

Yitzhak Tshuva's Delek Investments is negotiating to buy a 15 percent stake in insurance company Menorah Holdings. The company announced it is in talks to buy a 9.99 percent stake at a price that reflects a pre-money company value of $400 million.

Delek would also get an 18-month option to buy another 5 percent.

The option would be exercisable at the same share price as the first tranche of the transaction, a 13-percent discount off Menorah's current market value. Menorah would effect the deal with Tshuva via a private placement of shares. It explains that the discount under consideration factors in Delek Investments' strategic contribution, and the future cooperation of the two business groups.

The placement means the $40 million will be invested in Menorah, not pocketed by Menorah controlling shareholder Menahem Gurvitz. It appears that Delek recognized Menorah's need for cash to finance its huge acquisition of new pension fund Mivtachim, a tender it won with a NIS 710 million bid.

Delek bid in the tender in conjunction with insurance company Ayalon. The negotiations are also covering the minority shareholders' rights, and rights of first refusal.

Tshuva is one of Israel's most liquid businessmen. Both through Delek and privately he varies his portfolio through large-scale deals. His largest recent acquisition was in the U.S. property market, when he paid $675 million for Manhattan's Plaza Hotel.

Tshuva has also invested in communications (he acquired multichannel television provider Matav Cable Systems) and local real estate with a lightening takeover of Dankner Investments. Tshuva is also in talks to buy hotel chain Sheraton Israel from Koor.

His financial stability allows him high access to financial markets, which join him in financing some of the deals. His Gadot Biochemicals recently raised NIS 90 million in stock and convertible bonds, as well as his involvement in Canada's yield-producing property market.

Tshuva has also learned to exploit the cash in the hands of the "new banks", that is the insurance sector which has begun stepping in to finance deals that would traditionally be the role of the banking sector. His August acquisition of Dankner Investments was financed with a $30 million loan from Phoenix Assurance. When he figured out how much unallocated cash the insurance companies had available for loans and investments, and the ease with which they sign checks, Tshuva apparently decided he needed a piece of that business, too.

The Menorah transaction remains contingent on the approval of the companies' appropriate organs, and also of the treasury's commissioner of insurance, Eyal Ben Chelouche. He has already indicated he would approve the deal.

Delek Investments CEO Asaf Bartfeld stated, "This is a good business opportunity, not a strategic investment. We see insurance companies as financial entities in the long term that can yield return."